WHAT’S YOUR NAME?

Avoid Name Mismatch Audits

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Avoid Name Mismatch Audits

Category:
The Audit

The Audit category image

If you were married, divorced, or changed your name for any reason during the past year, do not forget to file to change your name prior to preparing your 2016 tax return. The IRS automatically conducts a name match on the first few letters of your last name. If the name on your tax return does not match the name on file at the Social Security Administration for your Social Security number, here’s what could happen;

  • You are unable to e-file your tax return
  • The IRS automatically accepts your income as taxable, but then disallows any deductions.
  • You may receive a notice from the IRS with taxes owed and underpayment penalties.

Here’s what you can do.

  • Prior to filing your tax return, go to www.ssa.gov and download form SS-5. Fill the form with the name change and file it as soon as possible.
  • Also notify your employer. Double check the W-2 you receive to ensure the change was made correctly. If the change is made on your W-2, you must make sure it is changed at Social Security.
  • If you are planning a major financial transaction in the near future you may wish to adjust the timing of the transaction or the timing of your name change to avoid complications.
  • Don’t forget to also change your name on other important documents like auto titles, drivers license, property titles, bank accounts, loan agreements, beneficiary documents and other accounts.

If you are unable to make the name change in a timely manner, use the name on file at the Social Security Administration AND with your employer when filing your taxes to avoid the automatic notification of a name mismatch.

Here is a link to the Social Security web site that walks through their name change process. Please be forewarned, this process is not as simple as it was in the past. You now need to provide proof of citizenship and submit documents that show the original and new names. Spend some time going over the name change process and plan accordingly.

Social Security Name Change Process

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Published: 08/26/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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ASK QUESTIONS BEFORE, NOT AFTER

When to Ask for Help

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
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When to Ask for Help
OR run the risk of a high tax bill

Category:
Planning

Planning category image

“Before taking action talk to your tax adviser.”

How many times have you seen this legal disclaimer and have your eyes gloss over? Unfortunately, there are too many times when taxpayers do not follow this advice and then must pay the price with an unnecessarily high tax bill.

Here are some of the most common situations that can save you money by seeking advice before you act.

  • Getting married
  • Selling a home
  • Donating stocks and investments
  • Getting divorced
  • Change in dependent status
  • Approaching retirement
  • Starting a business
  • Managing participation in tax-advantaged retirement accounts like 401(k), 403(b), and various IRAs
  • Death and birth of loved ones
  • Donating high value items
  • Selling stocks, bonds, mutual funds or business property (rentals)
  • An audit
  • Tax efficient transfer of your estate
  • Selling or buying high value assets (art, collectibles, real estate, and small business assets)
  • Determining Social Security benefit strategy

In advance of any of these events, or when in doubt, please ask for assistance. There are too many stories that include the words “if only he had talked to someone first.”

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Published: 08/19/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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THEFT LOSSES? TAX DEDUCTIBLE?

STOLEN! Can I Deduct it?

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
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STOLEN! Can I Deduct it?

Category:
Deductions

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Consider: Your home was broken into and your spouse’s $10,000 in jewelry is taken.

Consider: Your uninsured boat is taken from your cabin dock, along with fishing poles, fishing gear, and your lucky lure.

Can you deduct these loses on your tax return?

Perhaps, but it is tough.

The casualty and theft deduction

There is a provision in the tax code to account for losses due to disasters, theft, and other casualty losses. It is taken as an itemized deduction on your tax return. But there are limits.

  • Each loss is subject to a $100 deduction.
  • Your losses must exceed 10% of your Adjusted Gross Income before they can reduce your taxable income.
  • Your losses are net of any reimbursement for insurance or other funds received.
  • Theft related to your home, household items and vehicles are generally covered as qualified theft.
  • Since the market value of an item right after it is stolen is zero, the amount you can take as a deduction is generally your basis (usually cost) of the item.

Some hints

Theft. Really? Be prepared to prove your property was stolen. As soon as it is discovered missing, file appropriate reports with the authorities.

Valuation. Keep files of receipts for items of value. This will help prove your basis in the items stolen.

Investment schemes. Special rules apply if you are a victim of a Ponzi Scheme. If you think this applies to you, ask for assistance.

File timely reimbursement. If you think you can get reimbursement from an insurance policy, it is important to file your claim on a timely basis. You may need to prove your claim was denied or show the amount of reimbursement.

So while most theft will not meet an income threshold for deduction, you should be prepared to make the claim if it happens to you.

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Published: 08/12/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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DON’T BE SCAMMED

IMPORTANT: IRS Scam Epidemic

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
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IMPORTANT: IRS Scam Epidemic

Category:
What’s New

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In a recent key-note address to over 1,000 tax professionals in Chicago, John Koskinen, the Commissioner of the IRS, asked the audience to raise their hands if they had personally been contacted by someone pretending to be from the IRS. He re-iterated that he was not talking about clients, but those sitting in the audience. Well over 50% of the professionals raised their hands. So did the IRS commissioner.

The scam epidemic

Here is how the scam usually works. You receive a phone call from these would-be thieves representing themselves as IRS employees. They will have personal information of yours to make their demands seem credible. Their goal? Get you to pay them for fake past due taxes. They are demanding credit card payments, wire transfers, money orders, and even gift cards. These thieves often threaten victims with bank account seizure and immediate arrest.

It comes in many forms

This IRS scam is so prevalent, it is coming in many forms.

  • Some taxpayers are receiving emails.
  • Others receiving phone calls find their caller ID showing IRS credentials. These thieves often read back your personal information (stolen from somewhere else) to add to the believability of their lie.
  • They create fake taxes. One of the more recent scams creates a non-existent Student Loan Tax and demands immediate payment from in-debt students.
  • They direct you to fake web sites.

What you need to know

Identity theft is now so bad, that you can count on this scam happening to you or someone you know. If you receive a phone call from the IRS do the following.

Do not answer. If the phone ID says the IRS, make them leave a message. There is no need to raise your blood pressure with these low-life thieves. The IRS has recently re-confirmed they will not make initial contact with you via phone or email.

If you answer, hang up. If you inadvertently answer the phone, just hang up. Do not provide any information to the caller. Do not confirm any information the caller tells you. Dealing with these clowns can only make matters worse.

Do not fret. You are not alone in receiving this scam. Millions of taxpayers are dealing with the hassle of this theft. So stay calm. Remember, legitimate IRS communication starts with a letter that can be independently verified for accuracy without putting your identity at risk.

Tell everyone you know. This is important. Young taxpayers, older citizens, and new citizens are common victims of this scam. Help make everyone you know aware of this theft risk. Tell your kids, tell your parents, and tell your grandparents. Awareness is our best defense.

Report the scam. Follow the instructions provided by the IRS. Here is a link to their directions: Report Phishing and Online Scams

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Published: 08/05/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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BORROW OR WITHDRAW?

Borrowing Money from Your 401(k)

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
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Borrowing Money from Your 401(k)
Good idea? …not so much

Category:
Retirement

Retirement category image

For years you have put away 6% of your pay into your employer provided 401(k) retirement savings account. Your employer may have even matched 50% of your contribution. Now you want to take some of this money out in the form of a loan to help pay your bills or to buy a car. Before you take action, here are some things to consider.

Loan versus withdrawal

If you withdraw funds from a 401(k) prior to age 59 ½ you may be in for a surprise at tax time. Withdrawals are subject to income tax and often are subject to a 10% early withdrawal penalty. A better option is to consider loaning yourself the money. 401(k) loans are available for up to 50% of your account balance.

The advantages

There are many advantages of borrowing money from your own retirement account.

No immediate tax. You do not pay income taxes on the funds lent to you. If you withdraw the funds, you must pay ordinary income taxes and a potential penalty on the withdrawal.

You repay the loan. This re-establishes your original retirement account contributions for use during retirement.

Your interest payment is to yourself. Your 401(k) loan payment includes interest. This interest provides you a return on your original contributions. It is better to pay yourself interest than to pay this interest to a bank.

The disadvantages

Repay or else. If you leave your current employer you will need to repay all outstanding 401(k) loans immediately. If you do not, your remaining loan balance turns into a withdrawal subject to income tax and a potential early withdrawal penalty.

Opportunity lost. Your 401(k) loan amount is no longer invested. While your interest payments provide a small return, it usually is much lower than those available through retirement account investment options.

Less take home pay? If you wish to contribute to your retirement savings at the same level as before you took out the loan, you must make sure your retirement loan repayment does not impact your previous contribution levels.

When making the tough decision to borrow your retirement savings, remember to first consider all your alternatives. The risk of job loss and then immediately needing to repay this retirement plan loan often leads to financial hardship and an unwanted surprise at tax time.

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Published: 07/29/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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GIVE A GIFT

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
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Leveraging Gift Rules During Retirement

Category:
Retirement

Retirement category image

As you or family members approach retirement years, it is important to have a basic understanding of the IRS gift giving rules. With this understanding, there are opportunities to leverage this tax law without creating a tax problem.

The rule

You may give up to $14,000 to any individual (donee) in 2016 and avoid any gift tax filing requirements. If married you and your spouse may transfer up to $28,000 per donee. If you provide a gift to your spouse who is not a U.S. citizen, the annual exclusion amount is $148,000. Gifts in excess of this annual amount trigger the need to file a gift tax form with your individual tax return. The excess gift amounts are then added to your estate for potential estate taxation. The estate tax currently has a maximum rate of 40% and the donor of the gift (or their estate) is responsible for paying the associated tax.

Using the rule to your advantage

The unsaid gem within this tax law is this: You can transfer up to $14,000 ($28,000 if married) to anyone you wish each year tax-free. Additionally, most states also adhere to this federal law. So if you wish to move assets to loved ones without the burden of future taxation, consider the following ideas.

Make periodic gifts. Remember the gift-giving limit is per calendar year. To take full advantage of this tax-free transfer, consider starting now and make periodic payments. Every year you miss out on this annual limit reduces the amount a couple can transfer tax-free to each individual donee by up to $28,000 per year.

Fund college saving. Consider donating money into 529 College Saving plans for children and grandchildren. This can be done with automated deposits into the account. The account could be established by you or your grandchild’s parent.

Pay direct. If you are concerned about exceeding the annual limit for gifts to a single person, consider paying bills directly. Examples of this strategy might be paying medical bills directly to a hospital or directly paying college bills for a loved one.

Leave a cushion. Remember the annual limit. If you provide a gift for the maximum allowable to an individual, you may not provide any other gifts to this person during the year or the event would be deemed excess gift giving and require filing a gift tax form.

Property too. Gifts can include property as well as cash. You can donate investments or other physical property. If you do this, document the fair market value of the property when you transfer it. The IRS is requiring this documentation to ensure the value of the property transferred is consistently valued by you and the person receiving the gift.

Building a down payment. Often children burdened with college debt cannot afford to save the down payment required to own their first home. You can aid in this by helping build a down payment through gift transfers.

Keep it in perspective

Understanding and leveraging the annual gift tax rules can create tremendous tax savings. But this strategy should be done in conjunction with understanding your personal financial needs. Providing gifts of funds that you might later need for your own retirement can be problematic. It is best to review your gift plans prior to taking action.

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Published: 07/15/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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HURRY UP AND WAIT!

Prepare Now for Future Refund Delays

3860 Crenshaw Bl., #217  |  Los Angeles, CA 90008
Phone: 323.292.5407 | Fax: 877.690.7818 | Ontario: 909.428.1151
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Prepare Now for Future Refund Delays
IRS now required to delay refunds to many taxpayers

Category:
What’s New

What's New category image

Topline: If next year’s tax return claims an Earned Income Tax Credit or the Additional Child Tax Credit your refund will be held by the IRS until February 15th.

The delay in sending out tax refunds is mandated by recent tax law legislation because of the proliferation of identity theft and tax fraud. This extra time will be used by the IRS to help prevent revenue loss from early tax return filings claiming invalid tax refunds. Those most impacted by this change are early tax return filers. While the IRS plans future correspondence to alert taxpayers to this change, here are some things to note.

  • Entire refund. If your tax return claims either of these credits, your entire refund will be held until February 15th.
  • Do not delay. If you typically file early, do not delay filing your tax return because of this rule change. Tax returns can still be processed. Only the refund payment is being delayed.
  • The bottleneck. Filing early can help you avoid the bottleneck of tax refund processing. On February 15th you will want to be at the front of the line to receive your money.
  • Plan accordingly. If you historically plan on receiving and using an early refund, you will now need to plan for this delay.
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Published: 07/01/2016 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
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